Shortly
after Paul McKinnon joined Citigroup Inc. in early 2008 as its head of human
resources, he found himself helping the enormous bank withstand a global
financial crisis that would take down two other major financial institutions
(Bear Stearns and Lehman Brothers) and push the entire country further into a
deep recession.

The
crisis begat the federal government's controversial Troubled Asset Relief
Program, which ultimately lent the nation's major banks more than $400 billion
in taxpayer funds in order to stabilize them. Citigroup's share of the funds
totaled $45 billion (that money has since been repaid, with the government earning
a profit of $12.3 billion on its investment).

TARP
required the banks to set limits on their executives' pay, which meant McKinnon
had to devise an executive-compensation strategy that would satisfy the
government without alienating the top talent the bank desperately needed to
help it emerge from the crisis.

Posing
a special challenge to these efforts was the fact that there were no
established guidelines to follow during the process, says McKinnon.

"They
couldn't say exactly what they wanted, because I'm not sure even they knew what
they wanted," he says.

With
the help of his capable staff (including compensation specialist Mike Murray),
McKinnon put together a competitive plan that kept Citi's employees at the
company while meeting the expectations of the government, as well as the bank's
shareholders and board of directors.

What
was the secret to his success?

No
secret, he says, just lots of hard work and making sure Citi's comp committee
was kept fully informed.

"You
want to ensure the comp committee is completely comfortable with your approach
and fully in agreement with what you're trying to do," he says.

An
important lesson learned, he says, is to be firmly committed to the idea that
all of the parties you're dealing with are operating in good faith.

"When
you're engrossed in problem solving or negotiating, it's easy to get upset at
the other groups that have an interest in the outcome," he says. "But
you need to remember that these are people who are, like you, acting with the
best of intentions."

Problem
solving is much easier when you keep that in mind, says McKinnon.

Although
the TARP compensation limits affected only 2 percent of Citi's 260,000
employees, that still equated to more than 2,000 individuals. Yet McKinnon and
his team sat down with each of them to explain the pay scheme face-to-face.

"We
found that people were more willing to listen one-on-one and we could address
specific questions they had," he says.

McKinnon's
comp-related challenges didn't end with TARP. Last year, Citi had to endure a
public-relations headache after its proposed pay package for then-CEO Vikram
Pandit and other top leaders received a negative say-on-pay vote from its
shareholders. They had been urged to vote no by proxy advisory firms
Institutional Shareholders Service and Glass-Lewis, which asserted that the pay
wasn't sufficiently linked to the company's performance.

McKinnon
and his team swung into action.

"We
visited ISS several times to ensure we understood exactly what their concerns
were," he says. "Members of my staff and the chairman went to visit
the 25 biggest institutional shareholders of our stock, to understand their
concerns."

After
taking their concerns into account, and hiring a different compensation
consultant, McKinnon presented a new exec-comp package that was more tightly
linked to Citi's financial performance.

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It
received a 91-percent favorable vote at this year's shareholders meeting in
April.

"It's
one of those situations where I was quite proud of the fact that we responded
so well to shareholders' concerns," he says.

In
other areas, McKinnon established succession plans for the CEO and other top
managers at Citigroup. This work proved critical when Pandit resigned last fall
and was replaced by current CEO Mike Corbat, who previously headed one of Citi's
divisions.

One
of his most-heralded accomplishments has been creating a more integrated HR
department, with common processes and centralized reporting.

"When
I started here, the recent history of HR was that nothing really needed to be
consistent," he says. "Every region and business had a slightly
different set of policies and a slightly different brand of HR being practiced.
So one thing I'm quite proud of is the degree of consistency we've developed
since that time."

Prior
to joining Citi, McKinnon served as senior vice president of HR at Dell Inc.,
helping oversee the technology company's expansion from 15,000 employees in
1999 to more than 75,000 throughout the world by 2007.

He's
also spent a significant amount of time in consulting and academia, having
served as a professor at the University of Virginia's Darden School of Business
from 1982 to 1986.

In
a letter supporting the nomination, Corbat cites McKinnon's background in
academia and business as one of his greatest strengths:

"Paul
brings a unique perspective to the HR function that spans the theoretical and
the practical," he writes. "He has the ability to deliver tough
messages, which leave the individual comfortable with the situation ... he is
the exact type of individual needed as leader of an HR organization."